NZD/USD price struggles near 0.5615 as China economic slowdown impacts the Kiwi
NZD/USD struggles near 0.5615 as weak Chinese data weighs on the Kiwi
The NZD/USD pair continues to trade defensively near 0.5615 during early European hours on Friday, pressured by weak Chinese industrial data and growing concerns over trade policies. The New Zealand Dollar (NZD), often seen as a proxy for China’s economic health, faces challenges as industrial profits in China decline for the fourth consecutive month.
The RBNZ’s dovish outlook contrasts with the Federal Reserve’s cautious stance, which has supported the Greenback and added to NZD/USD’s downward trajectory.
NZD/USD price dynamics (Nov 2024 - Dec 2024) Source: TradingView.
China’s economic struggles weigh on the Kiwi
Data released on Friday highlighted a 7.3% year-over-year drop in China’s industrial profits for November, reflecting persistent challenges in consumer demand and a sluggish property market. These figures exacerbate fears of a prolonged economic slowdown in New Zealand’s largest trading partner, creating downward pressure on the Kiwi.
Adding to the concerns, speculation about potential 10% tariffs on Chinese goods from Donald Trump’s administration has unsettled markets. Analysts believe such policies could increase inflationary pressures and influence the Federal Reserve to adopt a more cautious approach to monetary easing in 2025. This scenario has strengthened the U.S. Dollar (USD), further weighing on NZD/USD.
Reserve Bank of New Zealand’s dovish stance
The Reserve Bank of New Zealand (RBNZ) is widely expected to continue its accommodative policy stance following the country’s recession in the third quarter. Markets have priced in a 70% likelihood of a 50 basis points rate cut in February 2025, with interest rates projected to decline to 3.0% by year-end.
Market participants remain focused on upcoming Chinese economic indicators and RBNZ decisions to gauge the pair’s next move.
Previously, we analyzed NZD/USD’s struggles below 0.5650, focusing on bearish technical patterns and external pressures. These dynamics continue to shape the pair’s performance.
